The changing value of money

By 2018, we could be paying £5.35 for a pint of milk, according to analysis carried out by Norwich Union. It says that if the household items that have risen in price by more than 10, or even 20 times over the past 50 years, continue to rise, we could be looking at one seriously over-inflated basket of goods at the supermarket checkout in decades to come.

Of course, the investment group’s predictions are just that: predictions. And they are meant to shock. Their aim is to get today’s generation of non-savers to start planning for the future by realising that today’s high prices would look cheap if prices were to continue to rocket at the rate they have done since 1958.

Food prices have risen in recent months, that’s a fact, as have fuel, gas and electricity prices too. But look further back to 50 years ago and food has plummeted in price.

In 1957, just a few years after the end of rationing, the average family spent a total of £14.30 a week, out of a gross income of £16. That’s the equivalent of £243 a week in today’s money, and the average spend now is £130 today for a family of four. As a percentage of earnings we now spend, on average, just 15% on food – not a third or more.

But one thing that was less of an issue in the 1950s was the cost of housing. These costs, including mortgage interest payments or rent, have more than doubled since 1957 according to the government’s annual Expenditure and Food Survey.

It cost on average £2,300 to buy a house in 1958. Since 1997 alone, house prices have grown by 231% (albeit they’ve come off slightly over the past 12 months). This means that homeowners are spending more than twice as much of their weekly budgets on mortgage payments and rent as was the norm 50 years ago.

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~ by spyaokid on November 11, 2008.

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